It isn't a debt crisis

Let me explain what you're looking at here. We've charted a fiscal gap, which is defined as the budget surplus (net of interest) that a government would need to run from 2013 on if it wanted to reduce its sovereign-debt load to 50% of GDP by 2050. So take America (please!). Currently its gross debt-to-GDP ratio is a bit over 100%. In order to reduce its debt load, as a share of GDP, by half by the year 2050, the government would need to average a budget surplus of nearly 10% of GDP (before taking into account interest payments). That's a much bigger surplus than it would have needed to run had debt remained stable through the Great Recession; gross debt-to-GDP was just 65% in 2007 (it was 57% in 2000, since you ask). For America, the increase in this fiscal gap is mostly due to the substantial deficits run over the past 5 years. Elsewhere, the substantial rise in the debt stock is to blame (like in Ireland, where the government took on massive bank debts). In a handful of countries, a big rise in interest rates is to blame, whereas in Britain and America interest rates have actually shrunk the gap a bit.

So, what does this all mean? Well, what it doesn't mean is that America needs to adopt a crash programme to move its fiscal balance to a primary surplus of 10% of GDP. There are costs to a high debt load, of course, but there is little reason to think that a 50% gross debt level is the right one, or that crash austerity is a better route to consolidation than debt stabilisation combined with appropriate investments in future growth.

What is suggests, however, is that while debt loads can be an ingredient in crisis, they are not the beginning and end of the story. Arguments of the form "America may soon face a situation like that in Greece" miss some pretty significant components of the Greek story. Looking over the list above, "euro-zone country with a large current-account deficit" is a vastly better predictor of crisis than "large debt load". An economy with its own currency can sustain very large debt loads without prompting a crisis. And an economy with its own currency and a persistent current-account surplus can flout every last bit of conventional debt wisdom and still avoid crisis. So long as it's called Japan, anyway.

"For America, the increase in this fiscal gap is mostly due to the substantial deficits run over the past 5 years."

Due to a 3%-of-GDP decrease in revenues, as well as unusual large expenditures, both the result of a financial crisis and economic downturn unequaled since the Great Depression, these caused by the spectacular stupidity of Greenspan et al for 20 years beforehand.

They deleted the text that was the point of the article. Namely, that the reason the NULJ countries aren't so bad off is due to them having their own currency. But then about a million people pointed out that Luxembourg uses the euro, so they removed the offending paragraph, deleted all the comments and now we are left with this...

Yes, a government's finances are more complicated than just its debt load, and no, the U.S. isn't exactly like Greece or Japan (even if they _are_ all financially doomed in different ways, which they are).

Debt is a huge part of the problem, though, which is why people keep harping about it. Debt is particularly dangerous when governments can only sustain it by subsidizing low interest rates (whey they buy their own bonds with new money instead of selling them at higher interest rates).

Rates aren't being kept as low as they are to support real-economy businesses. They don't need it, and they have never been in better balance sheet shape than they are right now. It's only government and financial services that demand ZIRP as a survival mechanism. The latter owns the former, and both of them own us - for the moment.

No, dude. Nobody serious says or imagines debt is irrelevant, not even Krugman. Rather, it is in reality put in context as one of a few other factors like nominal GDP growth (I.e. real GDP plus inflation) and long term blended bond rates. The obsession with the deficit and debt level is just some bizarre result of political opportunism, semantics, and macroeconomic ignorance/naïveté.

I'm unclear how overlaying a chart that shows 5 year growth in deficit and debt with a statistic that claims all will be well if only a average 10% surplus is achieved for the next oh....40 years. What?! 40 years!? I'm not that old, but have you met the politicians in the US? We don't have the capacity to run a 10% surplus for 1 year, let alone 40. Since 1960, the US government has had 6 - count them - 6 surplus years. And I think maybe 1 was in the neighborhood of 10%. Add in our aging demography, growing entitlement culture, immigration of low-skill workers, crushing household debt levels, persistent unemployment, projected health care expenditures, terrible educational performance by our young...I could go on...and I fail to see where the author's optimism comes from.

The author doesn't take into account the USA intergovernmental holdings. Yes, the "gross" US debt is 100% of GDP. But when you take out the money the government owes itself (kinda like when you take money out of your savings and into your checking to spend) the public debt-to-GDP ratio is only about ~70%. Of course we would like to pay back the Trust Funds that we are borrowing from (SS, Medicare, etc) but there is no real "obligation". There is no treasury certificate for it. So including that number in an analysis of ability-to-pay crisis is a little nonsensical.

Again, you have to look at total debt. I posted a spreadsheet with some graphs of U.S. debts, public and private, here.http://www.archive.org/download/TotalCreditMarket/TotalCreditMarketDebtO...
For years my voting pattern has been don't vote for any Republicans at the national level, on generational equity grounds, don't vote for any Democrats at the local level, because they represent the interests of producers of public services against less well off consumers, and don't vote for any incumbents of either party in the New York State legislature, for both reasons.
It is true that the big post-1952 federal debt explosions can be traced to Bush II and Reagan budgets. But it is also true that an explosion of private debt brought in the tax revenues that made the Clinton surpluses possible. Note that the vertical lines are budget years by Presidential Administration, though Congress of course also plays a role.

I don't understand the off-hand dismissal of interest payments. I don't see how the interest the government pays wouldn't be a substantial factor in any analysis. The Federal Reserve is keeping interests rates low to encourage business will borrow more and spend more. Would lower interest rates not affect the Federal Government and Treasury the same way?

Although I don't know how, I suspect and would hope that the Treasury is doing something to recapitalize America's balance sheet at this point in time when interest rates are so low. And I suspect that savings are spent for whatever Congress is blowing money on now these days.

But what happens when interest rates start to rise and the Treasury's cost of borrowing increases? I think that will be very scary for the America's budget.

"Let me explain what" you wrote here: Wishful thinking.
You put it like : The only thing the US needs to get its head out of the moving sands is to run "a primary surplus of 10% of GDP" until 2050....
Dream on.... As MrRFox comments, Americans (even more than Greeks, Argentinians and Russians) were smart enough to borrow from foreigners...... But one day, debtors will get smarter.

It is interesting to take a look back at the Presidencies since the Kennedy era and see how the various gentlemen that inhabited the White House handled their fiscal responsibilities when it came to the national debt. As shown in this article, the President that is responsible for accruing the largest cumulative annual percent growth in the debt may surprise you:

"Looking over the list above, "euro-zone country with a large current-account deficit" is a vastly better predictor of crisis than "large debt load". (R.A., Article)

No shit, Sherlock. A CA deficit means a country has to get credit from overseas to cover it. This is news? Naturally, a country that doesn't need foreigners to finance it (like Japan) never has to have its finances examined - and found wanting.

But never fear, hopelessly indebted nations or individuals always have to stiff their creditors at some point. When the Japs do that, they'll be stiffing themselves. Greeks and Argentines and Russians (and eventually Americans) were smarter.

I don't even know why this article should matter to anyone in America. This is such a political issue that facts don't matter. Everyone has their own chart. And solving a crisis is not nearly as much fun as having a crisis. Certainly not as much fun as inventing one.

This will be a big issue until after the election and then it will be on to the next best positioned crisis to create a firestorm. At least this is likely, unless I have miscalculated. After all, there is a lot of money to be made capitalizing on American debt.

The low interest has to come to an end at some point. And the FED will not be able to stop it. Once treasury yields go up, it will be a whole new ball game. Treasury bond bubble. That's what the FED is blowing now.

Well if you take a look at OECD web site, that's were these false "projections" stem from.

I wrote to OECD and asked them to correct their "projections", they "project" that Finland's (Maastricht criteria) debt/GDP increased 3,5% in 2011, when in reality the increase was 0,2%, and so on year after year. In reality that figure will come down from 48,6% to 47% in 2012 and to 45% in 2013.

That chart is wrong, to put it simply. Finland has no "gap" to 50% debt/GDP. Finland should be in the charts where Sweden is. I could consult OECD where they could stick their projections.